The alleged multi-million-dollar Ponzi scheme perpetrated by former Vancouver notary Rashida Samji has evolved into an administrative and logistical nightmare.

To date, investors have filed 58 lawsuits against her and her alleged accomplice, Arvin Patel; the B.C. Securities Commission has scheduled a 12-day hearing into Samji’s allegedly fraudulent activities; and the RCMP Commercial Crime Section is conducting a full-blown criminal investigation into the matter.

Last week, Samji and her two private companies filed for bankruptcy. Financial disclosure documents indicate that their liabilities — including $31.3 million claimed by investors — exceed their assets by about $28 million.

That means investors, if they are to make any material recovery, will have to tap into the “deep-pocket” financial institutions that unwittingly acted as conduits or facilitators for her scheme.

News of the scheme broke in February this year when the B.C. Securities Commission issued a public warning about an investment offering made by Samji and marketed, at least partly, by Patel, who worked as a financial planner at Coast Capital Savings Credit Union in Surrey.

Two months later, BCSC enforcement staff filed a notice of hearing alleging that Samji had perpetrating a massive fraud on investors.

Staff alleged that from 2003 to January this year, Samji raised $83 million from 218 investors for what she purported to be a “secure investment” in a winery that would yield six to 30 per cent annually.

In fact, the notice alleges, she did not use the funds for the stated purpose; rather, she deposited them into her personal accounts. Any return she paid to existing investors was not generated by the business, rather it came from money provided by new investors, the commission alleged.

In a concurrent development, Patel admitted he introduced about 90 of those investors to the scheme. Collectively, they accounted for $28.9 million of the total amount raised.

He admitted he should have known that the representations he made to investors about the viability of the investment were false, and agreed to a permanent ban from the B.C. securities market.

The commission has scheduled a hearing into Samji’s alleged breaches starting Feb. 4. It has reserved 12 days for the hearing, but it’s highly unlikely that it will proceed. In all probability she, like Patel, will enter into some form of settlement agreement.

News of the alleged fraud prompted a cascade of lawsuits. One lawyer, Scott Nicoll of Surrey, said he has filed, or expects to file, 46 to 48 lawsuits on behalf of 89 investors. Virtually all the plaintiffs are members of the Surrey Indo-Canadian community.

The lawsuits name Samji and Patel as defendants, as well as Worldsource Financial Management Inc. (where Patel was registered as a mutual fund salesman) and Coast Capital (where he worked) on the grounds that those two firms failed to properly supervise him.

A prospective class action has also been filed on behalf of some representative investors by Vancouver law firms Hordo Bennett Mounteer and Camp Fiorante Matthews Mogerman.

In addition to the defendants named by Nicoll, the class action names three financial institutions through which Samji allegedly funnelled money from her scheme — TD Bank, Royal Bank and Vancity Savings Credit Union.

The application to certify the lawsuit as a class proceeding is set for April. Given the high stakes, it is almost certain that whoever wins, the other side will appeal.

I asked Nicoll why his clients don’t piggyback on the class action. He said there are certain common issues, such as whether Coast Capital failed to properly supervise Patel, that are appropriate issues for a class proceeding.

But he said some issues are unique to each client, most notably the degree of reliance they placed on what Patel told them about the investment. The more reliance, the bigger the potential damage award. This is an issue that can be better addressed in an individual action.

As you can imagine, all these lawsuits are creating an administrative nightmare for the court. B.C. Supreme Court Justice Laura Gerow has been assigned the job of managing the process.

Meanwhile, Mounties are forging ahead with a criminal investigation: “It is definitely our priority investigation right now,” Sgt. Kurt Bedford, head of the RCMP Commercial Crime Section’s investment fraud unit, said in an interview Friday.

Samji has retained high-profile securities lawyer Rod Anderson of Harper Grey to represent her, while Sean Boyle of Blake Cassels & Graydon, who has become quite prominent on the securities circuit, is representing Patel.

In February, when the scheme was publicly disclosed, the B.C. Society of Notaries Public appointed a custodian for Samji’s practice and the commission secured the appointment of a receiver over any and all assets belonging to Patel and Samji. (That receiver is Patty Wood of MNP Ltd., the insolvency arm of the accounting firm Meyers Norris Penny LLP).

Last week, Samji filed for personal bankruptcy. In her disclosure documents, she declared $4,863,525 in assets, consisting mainly of her interests in five properties on the Sunshine Coast ($1,924,000); her interests in two condos on Richard Street in Vancouver and Westview Drive in North Vancouver ($685,000); and her condo residence on West 14th Avenue in Vancouver ($2,160,000).

She also declared $33,717,334 in liabilities, of which $31,299,234 are claims by investors.

The bottom line is that her personal liabilities exceed her assets by $28,853,809.

Her two private companies, Samji & Assoc. Holdings Inc. and Rashida Samji Notary Corp., also filed for bankruptcy. They declared $980,000 in assets (all cash) and reported the same investor claims.

After adding in the cash, the combined shortfall is about $28 million, which gives you a rough idea of the magnitude of the alleged fraud.

I say “rough” because investor claims usually include large amounts of interest that had been promised, but not paid. To the extent to which the promised returns were never economically realistic, such claims are largely theoretical.

Keep in mind that this is the amount Samji owed when the music stopped. Many earlier investors were repaid principal and interest. The net amount accruing to Samji is believed to be about $7 million.

Bankruptcy trustee Stephen Boale of Boale Wood & Company Ltd. has scheduled a first meeting of creditors for Jan. 4.

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